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Reimbursement News

Judge Denies Hospital Org Attempt to Block 340B Drug Payment Cut

A federal judge denied an attempt by the AHA, AAMC, and America’s Essential Hospitals to prevent CMS from enforcing a $1.6 billion 340B drug payment cut.

340B drug payments

Source: Thinkstock

By Jacqueline LaPointe

- A federal judge recently ruled that CMS can start to reduce 340B drug payments to hospitals by $1.6 billion starting on Jan. 1, 2018, striking a blow to several industry groups that urged the court to delay enforcement of the new rule.

US District Judge Rudolph Contreras argued that the American Hospital Association (AHA), Association of American Medical Colleges (AAMC), and America’s Essential Hospitals prematurely called on the courts to block CMS from reducing 340B drug payments.

The three industry groups filed a lawsuit in November 2017 to stop CMS from enforcing a final rule released earlier that month that would change how Medicare reimburses hospitals under the 340B Drug Pricing Program.

The program aims to help hospitals “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services” by providing discounted drugs. 340B hospitals received the average sales price of the medication plus 6 percent.

Under the new Medicare Outpatient Prospective Payment System rates, 340B hospitals will now receive the average sales price less 22.5 percent.

CMS designed the 340B drug payment cut to reduce the difference between the price hospitals paid to acquire covered drugs and the amount Medicare reimburses to hospitals for the same drugs.

The Medicare Payment Advisory Commission (MedPAC) reported in 2015 that 340B hospitals received a minimum discount of 22.5 percent of the average sales price of covered drugs even though the organizations received reimbursement at a rate of the average sales price plus six percent.

MedPAC’s investigation also revealed that hospitals in the program spent more on prescription drugs.

CMS stated that the old payment methodology results in unnecessary utilization and possible overutilization of separately payable drugs.

The AHA, AAMC, and American’s Essential Hospitals disagreed during the rule’s comment period, contending that the hospital reimbursement reduction would harm care access for vulnerable patient populations.

Dramatic 340B drug payment decreases would stop hospitals from providing comprehensive services, the groups explained.

All 340B hospitals recently surveyed by 340B Health said that drug reimbursement reductions would impact their ability to provide services to low-income and rural patients.

Another 86 percent stated that payment cuts would also impede their ability to provide key clinical services that require prescription drugs covered by the program, including infusion therapy and oncology services.

When CMS finalized 340B drug payment reductions despite industry group protests, AHA, AAMC, and American’s Essential Hospital sought legal action against the federal agency.

However, the federal judge ruled that the industry groups cannot block CMS from enforcing reimbursement rate cuts without concrete claims that the health policy harms hospitals.

“The Plaintiffs’ problem, however, is that they have not yet presented any specific claim for reimbursement to the Secretary upon which the Secretary might make a final decision,” Judge Contreras wrote. “Indeed, the Rule that sets the reimbursement rates at issue and which might form the basis of reimbursement claims that they might submit someday in the future has not yet gone into effect.”

Furthermore, comments submitting during the rulemaking process do not qualify as concrete claims.

An HHS representative told the Wall Street Journal that the ruling supports the Trump administration’s efforts to reduce prescription drug costs.

“Under President Trump, the Department of Health and Human Services has acted to lower the cost of medication for Medicare beneficiaries,” the spokesman told the news source. “This ruling allows that effort to move forward and advance President Trump's strong commitment to addressing the high cost of prescription drugs.”

The AHA responded by reemphasizing that 340B drug payment cuts will threaten care access for vulnerable patients and the association will continue their efforts to reverse the reimbursement reductions through the courts and Congress.

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